11/19/2009 @ 4:42PM

Incentives Vs. Recognition: How Do You Get Your Workers Engaged Again?

It takes two to tango. These days, however, many chief executive officers worry they may be dancing alone with their employees standing idle on the sidelines. The recession has pummeled employee engagement, and poor employee morale has left CEOs feeling out of step with their workforce. What can you do to get your workers moving again? How do you capture their hearts and give them back the drive to do their very best?

Two tools are often prescribed to CEOs by their human resources experts: incentive programs and recognition programs. Incentive programs are contests usually limited to a specific group within a company, such as sales, in which employees compete to win some prize. By contrast, recognition programs acknowledge and reinforce the accomplishments of the majority of employees. They are more about long-term goals and values.

When and how these two approaches are best used can get confusing. As a CEO who has dealt with incentives and recognition for more than a decade, I offer five questions for you to ask to help you determine which may work best for you.

1. Is your company morale in a state of emergency?

If yes, then it’s time to reclaim your company-wide culture and reestablish your values. Recognition programs are a powerful way to do that.

Symantec
provides an example. After a 2005 merger that doubled its employee base from 6,300 to 15,000, the company needed to diffuse anxiety and create a unified culture fast. To do so, Symantec rallied around the company’s core values, such as innovation and action, and rewarded employees when their performance reflected those values. The rewards came as frequent e-mail thank-you notes often accompanied by gift cards worth $25 to $300, redeemable immediately. Within six months, Symantec’s employees were earning 800 rewards a week. Between 2008 and 2009, at the height of the program, engagement levels were measured as rising 14% in nine months–even though the recession was at its worst.

Deploying a recognition program that highlights and rewards company values helps advance your long-term mission and boosts morale.

2. Do you know what really motivates your employees?

Many CEOs I speak with believe cash is king, but that certainly isn’t always true. Yes, money is the currency of compensation, but it is typically far less effective as the currency of motivation or recognition. Why? Because it is psychologically linked to expectation and entitlement, and not to appreciation or recognition for a job well done.

A year-end cash bonus doesn’t give an immediate sense of gratification for a job done today, and it may not address what’s on an employee’s mind today. It also is ineffective in fueling long-term motivation. Giving freedom to choose a meaningful reward is often a better idea.

After an employee has worked long hours to meet a tight deadline, for example, he may be motivated to spend more time with his family. Recognizing that employee with a thank you, a gift card of his choosing or even a personal day off can take you very far. Such on-the-spot recognition, done year-round, inspires ongoing motivation and high performance.

3. Do you just need to hit a quarterly target or deadline?

You’re not always focused on fulfilling a larger mission or vision. Sometimes you’re hard-pressed to meet a single target or deadline. That’s when an incentive program can help.

KitchenAid, for example, needed to boost direct sales of a particular appliance a few years ago. It launched a two-month “Round Up Sales” incentive promotion that rewarded especially successful retail store sales associates and account managers with Western-themed gifts such as steaks and leather goods. The program easily achieved its short-term goal after winning nearly 97% participation among retailers. KitchenAid’s overall sales were 16% higher than in the same period a year before.

Note that while incentives are effective at reaching short-term goals, they don’t go after overall cultural change and are typically limited to select divisions or units.

4. Are you trying to motivate your entire workforce or just your star performers?

Most of us have been taught the 80-20 customer loyalty rule, that 20% of your customers drive 80% of your revenue. But that equation doesn’t work with employee engagement. There the masses matter, and they matter a lot. Why? I can’t put it better than researchers at the consulting firm Watson Wyatt did: “Highly engaged employees are already working at or near their peak but are often limited by their less engaged co-workers.”

If you address the core of your workforce, engagement will go up across all groups. Don’t just shower resources on your platinum performers or senior executives. Spread the wealth. Direct recognition programs at the middle-tier masses and you’ll improve engagement company-wide.

5. Are you and your team committed to making employee engagement both an art and a science?

Employee engagement has long been seen as the soft side of managing–the artful part. That’s not so today. It’s much more serious than that. When your employees are disengaged, it affects their morale, your morale and your bottom line. A 15% improvement in employee engagement can mean a 2% uptick in operating margin, according to a study by Towers Perrin, the human resources company.

So once you’ve started to recapture your employees’ attention, don’t stop. Like any strategic initiative, building engagement requires ongoing attention and management. Make sure you have a strong communication team to educate your employees about your goals. Set milestones, and measure and track the reach and redemption of your rewards. Put questions about your recognition programs in employee surveys so you have quarterly feedback. Get involved, and show your commitment. Celebrate small wins every day, year round. Engagement will return in time, and you and your employees will end up back in lockstep.

Eric Mosley is the chief executive officer of Globoforce, which advises businesses on employee recognition strategies.